Second Price Auctions without Expected Utility

Abstract

Expected utility maximizers bid according to dominant strategies in second price auctions for risky prizes, bids are independent of the number of other bidders or the reserve price, the optimal reserve price is independent of the number of bidders, and ascending bid and second price auctions generate the same expected revenue. If expected utility fails, none of these results remain true, and symmetric equilibria may not be unique. If fanning in and betweenness hold, uniquenes is restored, bids fall when the number of bidders or the reserve price increases and second price auctions generate higher bids than ascending bid auctions. Journal of Economic Literature Classification Numbers: D81, D44.